Chris Bowen has been hitting the airwaves lately, hyping up the ‘unfair terms’ legislation proposed to be introduced into Parliament the middle of the year. He produced a Media Release on Sunday (why he chose Sunday beats me) stating that a new national unfair contracts term provision would protect consumers entering into standard-form contracts (for Victorians, this is actually less protection than currently exists – in Victoria the protection extends to consumers whether they have standard-form or negotiated contracts).
The media release goes on to note that the new law ‘will not apply to the upfront price in a contract’ but ‘would apply to other indirect costs, including exit, default or penalty fees’. Of course true ‘penalty’ fees are already unlawful at common law – liquidated damages are ok provided the agreed sum is not a true ‘penalty’ (recall Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd  AC 79) – the problem is, it’s tough to prove something is a ‘penalty’ and the costs of pursuing litigation normally make it impractical to sustain such a claim – so people may grumble, but tend to pay to protect their credit rating rather than defending their legal rights. We can only hope that this unfair terms legislation might make proving a penalty exists and that it is unfair simpler – and cheaper. The media release states that new enforcement powers would be given to the ACCC in relation to the unfair terms provisions and hopefully this will open up access to remedies.
In an interview with Chris Smith on 2GB this morning, Bowen indicated that the government is currently ‘working on a draft of the legislation’ and expect it to be introduced in the middle of the year. He again emphasised it would only apply to standard form contracts and set out the options they are considering – or have considered:
1. Require all contract terms to be fair and let the regulators and courts decide what is fair
2. provide a list of things that will always be unfair
3. provide a list of things usually unfair, but require the court to take account of all the circumstances.
The third option is the one adopted in Victoria and is the most practical – it is also consistent with the approach taken in other parts of the TPA, such as in relation to to unconscionable conduct. Let’s hope it’s the one they settle on.
Watch this space …